Analysis

Today's Theranos would have gone public via a SPAC

, Reuters

At least the damage at Theranos was confined to professional investors. Elizabeth Holmes’ blood-testing outfit touted novel technology and big future sales before its collapse. Holmes, whose trial starts on Wednesday, blurred the lines between marketing and fraud, and Theranos' multibillion-dollar private-market valuation dwindled to nothing. Fast forward and Trevor Milton, founder of electric-truck firm Nikola (NKLA.O), is facing similar charges. Nikola, though, has publicly traded shares.

Nikola came by its listing through a mid-2020 merger with a special-purpose acquisition company. Then in July 2021, the U.S. attorney’s office in Manhattan indicted Milton for misleading investors. He pitched Nikola One, the firm's debut truck, as a fully-functioning prototype. In reality, the product was missing significant parts and had to be towed onto the stage before its unveiling, according to the indictment.

Misrepresentations about Nikola's financial prospects also spurred investor interest after it went public, prosecutors say. Milton talked of “billions and billions” of sales contracts that were binding when the company actually had 14,000 reservations, most of which could be canceled. He has pleaded not guilty.

In the recent craze for blank-check companies in the United States, dozens of SPACs seeking merger targets within a set period, typically two years, have gone along with ambitious forecasts to get deals done. That has turned early-stage startups into publicly traded companies whose shares are available to everyone.

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